The second tax threshold - what amounts should it be counted on?


Taxpayers settling income tax on general principles should know the amount of tax thresholds that apply to settlements with the tax authorities. As part of the tax scale, there is the first and second tax threshold and it is them that determines the amount of tax that must be paid to the tax office.

Tax thresholds in 2021

The tax thresholds in 2020 have changed because the income tax rate for the first tax threshold has been reduced, which applies to income obtained after January 1, 2020. In 2021, the legislator did not introduce any further changes in this regard and kept the tax rates at the same level. Currently, the rates of income tax settled on general principles are as follows:

  • 17% - the first tax threshold,
  • 32% - the second tax bracket.

The first tax threshold is intended for taxpayers whose income in a given tax year was not higher than PLN 85,528, while after this amount is exceeded, the second tax threshold applies. Together with the package of changes to the acts under the New Polish Deal, from 2022 the second tax threshold will be increased to PLN 120,000, more in the article: The New Polish Deal and tax thresholds - check the changes

How to settle the second tax threshold in 2021?

Exceeding the first tax threshold does not mean that the taxpayer will be required to pay tax in the amount of 32% of all earned income. Because the second tax threshold, i.e. 32% of the tax, must be paid only on that part of the income which exceeds PLN 85,528.

Example 1.

The taxpayer was taxed on general terms, in 2021 he earned an income of PLN 100,000. What tax will he have to pay?

Taxpayer's income up to PLN 85,528 will be taxed with the first tax threshold:

PLN 85,528 * 17% = PLN 14,539.76

On the other hand, the excess of income over the threshold amount from the first threshold will be taxed using the second tax threshold:

PLN 100,000 - PLN 85,528 = PLN 14,472

PLN 14,472 * 32% = PLN 4,631.04

The taxpayer will pay the tax in the amount of: PLN 14,539.76 + PLN 4,631.04 = PLN 19,170.80.

As the example above shows, for taxpayers who earn more than PLN 85,528, taxation using the tax scale may turn out to be unfavorable. Therefore, in such a situation, it is worth considering taxation with a flat tax. Read more about the tax thresholds:
- Calculation of the advance payment when the first tax threshold is exceeded
- Exceeding the threshold and the advance payment for the employee's income tax
- Tax scale - business income tax

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The second tax threshold and joint settlement with the spouse

If the income of the taxpayer, which is settled jointly with the spouse, exceeds the second tax threshold, he can still pay tax at the rate of 17%.

As a rule, as long as the taxpayer's income does not exceed PLN 85,528, it is subject to taxation according to the first tax threshold. At the same time, it should be borne in mind that if the income exceeds the limit amount and the taxpayer submits a joint declaration with the spouse whose income falls within the first tax threshold, his income will still be taxed at the 17% rate.

In the case of joint settlement of the spouses, their incomes are added up. They are divided by two and then the tax scale is applied. This result is multiplied by two more and the correct amount of tax is obtained, from which tax allowances can still be deducted. The taxpayer must remember that if he ceases to jointly settle with his spouse, the above rule will no longer apply. Then, from the month following the month in which individual settlement was started, income tax advances are transferred according to the conditions applicable to settlement on general principles.

Advance payment of income tax for employees and exceeding the threshold during the month

From 2020, the method of calculating the income tax advance payment when an employee exceeds the first tax threshold during the month has changed. Before the amendment to the regulations, the entrepreneur was obliged to calculate the advance payment according to the 32% rate from the month following the month in which the taxpayer exceeded the first tax threshold. However, at present, the entrepreneur calculates the advance payment for the tax in the month of the employee's transition to the second tax threshold in a proportional manner, i.e. up to the amount of PLN 85,528, the advance payment is calculated according to 17% tax rate, 32% tax is charged above the limit.

Tax thresholds in the system

The system monitors the amount of income earned by the entrepreneur during the tax year. In the event that a taxpayer settling in accordance with general rules in a given tax period exceeds the income in the amount of PLN 85 528, the system will automatically determine the tax amount taking into account the rates for the first and second tax thresholds.

The advance for income tax in the system should be generated in the tab START »TAXES» INCOME TAX »CALCULATE TAX, where you should select the correct period.

If the income achieved in a given tax year exceeds PLN 85,528, the system will apply a tax rate of 17% to this amount. On the other hand, the excess of earned income will be taxed at the rate of 32%, intended for the second tax threshold. Additionally, the system will automatically stop deducting the tax-reducing amount. Details of the calculation of the advance income tax can be seen after clicking on SEE CALCULATION DETAILS for the advance payment for a given period.